Question
Scott Investors, Inc. is considering the purchase of a $450,000 computer with an economic life of five years. The computer will be fully depreciated over
Scott Investors, Inc. is considering the purchase of a $450,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $800,000 in five years. The computer will replace five office employees whose combined annual salaries is $140,000. The machine will also immediately lower the firms required net working capital by $90,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 34%. Is it worthwhile to buy the computer if the appropriate discount rate is 12%? After year 5, Scott Investors is expected to grow at a rate of 4%
Assume the value of debt is$ 200,000 and the number of shares outstanding is 20,000. Given this information, what is the firm value? (don't include commas)
What is Scott Investors price per share of equity? (round to 2 decimal places)
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